CN reports Q3-2012 net income of C$664 million, or C$1.52 per diluted share

MONTREAL, Oct. 22, 2012 — CN (TSX: CNR)(NYSE: CNI) today reported its financial and operating results for the third quarter and nine-month period ended Sept. 30, 2012.
Third-quarter 2012 highlights
 Net income was C$664 million, or C$1.52 per diluted share, compared with year-earlier net income of C$659 million, or C$1.46 per diluted share.
 Q3-2012 diluted earnings per share (EPS) increased 10 per cent over year-earlier adjusted diluted EPS of C$1.38 that excluded an after-tax gain of C$0.08 per diluted share on the sale of substantially all of the assets of IC RailMarine Terminal Company during Q3-2011. (1)
 Revenues for the most recent quarter increased eight per cent to C$2,497 million, while revenue ton-miles rose seven per cent and carloadings increased three per cent.
 Operating income increased five per cent to C$985 million.
 The operating ratio increased by 1.3 points to 60.6 per cent.
 Free cash flow for the first nine months of 2012 was C$1,036 million, including the impact of Q1-2012 voluntary pension plan contributions totalling C$450 million, compared with free cash flow of C$1,328 million for the same period of 2011. (1)

Claude Mongeau, president and chief executive officer, said: “CN’s focus on operational and service excellence helped the Company post a solid third-quarter performance, with revenue growth in all our business segments and solid improvement in most of our key operating metrics.
“Petroleum and chemicals led the way with a 15 per cent increase in revenues, largely as a result of higher shipments of crude oil originating in western Canada. CN’s crude oil volume in the quarter rose to a run rate of 40,000 carloads on an annualized basis.
“We continued to improve service and were able to make solid progress in our key velocity, efficiency and safety metrics across our network.”
Mongeau also said: “While cautious about the strength of the economy, we see continued opportunities to grow our business in the longer term. Through our agenda of supply chain collaboration, CN expects to increase revenues slightly faster than general growth in the North American economy and to accommodate this growth at low incremental cost.”

New CN share repurchase program
Mongeau said: “With our strong balance sheet and expectations of continued
shareholder value creation, we are pleased to announce that CN’s Board of Directors has
approved a new share repurchase program for up to C$1.4 billion in common shares.
This will be executed through a normal course issuer bid to purchase for cancellation a
maximum of 18 million shares. ”
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large portion of its revenues and
expenses is denominated in U.S. dollars. As such, the Company’s results are affected by
exchange-rate fluctuations. On a constant currency basis that excludes the impact of
fluctuations in foreign currency exchange rates, CN’s third-quarter and first nine-month
2012 net income would have been lower by C$8 million, or C$0.02 per diluted share and
C$25 million, or C$0.06 per diluted share, respectively. (1)
Third-quarter 2012 revenues, traffic volumes and expenses
The eight per cent rise in third-quarter revenues mainly resulted from higher freight
volumes, due in part to growth in North American and Asian economies and the
Company’s performance above market conditions in a number of segments ; freight rate
increases; and the positive translation impact of the weaker Canadian dollar on U.S.-
dollar-denominated revenues.
Revenues increased for petroleum and chemicals (15 per cent), coal (13 per cent), grain
and fertilizers (10 per cent), automotive (nine per cent), metals and minerals (seven per
cent), intermodal (six per cent), and forest products (three per cent).
Revenue ton-miles, measuring the relative weight and distance of rail freight transported
by CN, increased seven per cent from the year-earlier period.
Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue
earned on the movement of a ton of freight over one mile, increased two per cent over
the third-quarter 2011 performance, driven by freight rate increases and the positive
translation impact of the weaker Canadian dollar, partly offset by a lower fuel surcharge
and an increase in the average length of haul.
Operating expenses for the third quarter increased by 10 per cent to C$1,512 million,
mainly due to higher labor and fringe benefits expense, increased purchased services and
material expense, as well as increased volume-related fuel costs.

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